ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The Federal Reserve Act of 1913 gave the Federal Reserve responsibility for setting monetary policy. The Federal Reserve controls the three tools of monetary policy–open market operations, the discount rate, and reserve requirements.

Detailed explanation-2: -The Federal Reserve conducts the nation’s monetary policy by managing the level of short-term interest rates and influencing the availability and cost of credit in the economy. Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates.

Detailed explanation-3: -The Board of Governors guides the operation of the Federal Reserve System to promote the goals and fulfill the responsibilities given to the Federal Reserve by the Federal Reserve Act. All of the members of the Board serve on the FOMC, which is the body within the Federal Reserve that sets monetary policy.

Detailed explanation-4: -The FOMC is the body of the Federal Reserve System that sets national monetary policy (figure 2.4). The FOMC makes all decisions regarding the appropriate position or “stance” of monetary policy to help move the economy toward the congressionally mandated goals of maximum em-ployment and price stability.

Detailed explanation-5: -Supervising and regulating banks and other important financial institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers. Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets.